Sign in

    Brighthouse Financial Inc (BHF)

    BHF Q3 2024: Q4 Reinsurance Deal to Improve Capital Efficiency

    Reported on May 13, 2025 (After Market Close)
    Pre-Earnings Price$50.51Last close (Nov 8, 2024)
    Post-Earnings Price$50.51Last close (Nov 8, 2024)
    Price Change
    $0.00(0.00%)

    What went well

    • Pending reinsurance agreements and additional flow reinsurance opportunities: Executives highlighted multiple in-force reinsurance negotiations, including a specific agreement expected to close in the fourth quarter, which could improve capital efficiency and lower risk-based capital requirements.
    • Strong new business momentum supported by robust sales: Management emphasized that there are no plans to slow down sales—citing a very good October performance—and noted that their capital strategy, including a new hedging program for Shield products, positions them well for continued strong sales.
    • Potential for investment portfolio optimization: When asked about optimizing the investment portfolio, management confirmed that exploring such opportunities is on the table, which could further enhance overall financial performance.

    What went wrong

    • Normalized statutory loss impact: The company reported a $300 million normalized statutory loss in Q3 driven in part by continuing new business strain, suggesting a potential for further negative earnings pressure.
    • Adverse interest rate environment: The quarter saw a modest loss attributed to a significant change in the interest rate environment, highlighting ongoing vulnerability to market volatility.
    • Uncertainty in legacy hedging strategy: The development of a separate hedging strategy for the legacy block remains incomplete and may expose the company to further risks and capital pressures in the future.

    Q&A Summary

    1. RBC Stability
      Q: Has RBC ratio peaked?
      A: Management noted they don’t provide precise forecasts, but with $1.3B in liquid assets and a pending reinsurance deal, they expect the RBC ratio to be near the lower end of their 400%-450% target range, with improved strain management (see ).

    2. Risk Management
      Q: Added risk management expertise?
      A: They have boosted risk management by hiring additional hedging and finance professionals over the past six months to better address new business strain (see ).

    3. In-Force Impact
      Q: Why drag on RBC from legacy?
      A: Legacy in-force contracts are still weighing on the RBC due to the complexity of combined hedging; efforts to simplify these are underway (see ).

    4. Legacy Hedging
      Q: Future hedging for legacy block?
      A: They are developing a separate hedging strategy for the closed legacy block, with work expected to continue into 2025 (see ).

    5. Reinsurance Deals
      Q: More reinsurance opportunities?
      A: The team is evaluating various in-force and flow reinsurance opportunities, with one significant deal expected to close in Q4 (see ).

    6. Tactical Rates
      Q: Any tactical rate moves?
      A: They are not engaging in tactical rate positioning; the modest losses were due to a steepening yield curve affecting short-term rates (see ).

    7. Investment Optimization
      Q: Optimize investment portfolio?
      A: While potential exists for optimizing their investment portfolio, including possibly an IMA, no concrete plans have been announced (see ).

    8. Buyouts/Annuitization
      Q: Consider buyouts or annuitizations?
      A: They have historically avoided buyouts due to distributor concerns and disruption, choosing instead to focus on core strategies (see ).

    9. Market Scope
      Q: Is TAM entire closed block?
      A: They view the total addressable market broadly and are considering all possibilities, though prioritization details are yet to be finalized (see ).

    10. Norm Stat Earnings
      Q: Long-term norm stat trends?
      A: They expect a gradual improvement in statutory free cash flow as the legacy block runs off, with detailed projections to be provided next year (see ).

    11. Product Structure
      Q: Any product changes?
      A: There are no fundamental changes to the product offering; only the hedging strategies are being updated to reflect current needs (see ).

    12. Reinsurance Details
      Q: Onshore vs offshore deal?
      A: They declined to elaborate on whether the reinsurance will be onshore or offshore, only affirming confidence in closing the deal in Q4 (see ).

    13. Shield Sales
      Q: Will Shield sales slow down?
      A: Management expects Shield sales to continue strongly, driven by robust new business and improved hedging processes (see ).

    14. Free Cash Flow
      Q: Free cash flow timing?
      A: Statutory free cash flow projections will be delayed until the new hedging strategy is fully established (see ).

    15. Runoff Earnings
      Q: Runoff segment earnings steady?
      A: Although the runoff segment experienced some volatility, margins were in line with expectations, offset by solid performance in the life segment (see ).

    16. Reinsurer Switch
      Q: Impact of reinsurer switch?
      A: Switching reinsurers in June helped bolster fixed annuity sales, resulting in a noticeable rebound in that part of the business (see ).

    Related Publications